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Demystifying Prime Day

Amazon’s Prime Day has become a truly unique retail event since its launch in 2015. In anticipation of Prime Day 2018, Marshal Cohen and Stephen Baker got together to discuss the event’s performance, characteristics, evolution, and future potential. Here are the key takeaways from that conversation.

Priming the pump

Prime Day isn’t typically announced until the last minute, which curtails the potential for planned purchasing. In 2017, Prime Day took a new format and spanned three days. NPD’s Checkout
E-commerce Tracking information shows that the few hours allotted on the lead-in day did not impact that day’s dollar sales nearly as much as they may have on the two days that followed. It is likely, though, that those lead-in hours helped to offset the lack of longer-term advance planning, priming the pump for the main day of the event.

The expansion of Prime Day into a three-day event in 2017 amplified the comparisons to Black Friday. The key difference is that the extension of Black Friday into more than a one-day promotional event has been going on for years. During Black Friday week more sales/purchases are happening Thursday and Friday and less over the weekend. Black Friday is a known day that consumers can plan on and prepare for. While this kind of evolution will take time, Amazon is looking to speed-up adoption of Prime Day by quickly evolving its day of sales into a larger event.

“The mystique of Prime Day may add some allure, but the
lack of definition certainly curtails some of the opportunity for consumers to
have planned purchases. The anticipation effect can do more for sales than the
mystique of when it is.” – Marshal Cohen

“Just as Amazon started to do last year, quickly
expanding Prime Day from a day to a three-day event, putting some framework and
a bit more structure around it, would allow consumers to plan and could prove
beneficial.” – Stephen Baker

Category performance
isn’t a universal fit

Category performance during the Prime Day event is heavily dictated by daily promotions, but the online association is also a big piece of the puzzle. As we analyze consumer omnichannel shopping movement we are gaining a better understanding of distribution of spending online vs. in-store. NPD’s Checkout data shows that, in general, e-commerce buyer penetration varies by category.

Tech and small home appliances were the big Prime Day 2017 event winners, with housewares not far behind in terms of sales. The tech industry also stood out as a segment that had much higher revenue growth than unit growth, illustrating that Amazon is driving sales with more expensive tech products than normal. However, the same isn’t true in other product segments where the average prices of items sold during Prime Day 2017 were similar or even less than the Q3 2017 average.

“As seen by the top Prime Day performers, we’re not just selling
more stuff, we’re selling it at different prices, and even at higher prices. Consumers
aren’t waiting for lower priced product, they’re waiting for higher priced
product at lower prices. That’s the real cause and effect.” – Marshal Cohen

“Last year we saw comments on social media that the items
included in Prime Day sales are just low-priced products, but that’s not the
reality of what’s selling.” – Stephen Baker

The intersection of
online growth and social influence

The dramatic growth in dollar sales compared to unit sales speaks to Prime Day’s premium focus, and subsequent nature of its impact on consumer engagement.

“Word of mouth, or in this case ‘word of online’
communication plays a huge role in Prime Day successes – when consumers say ‘look
what I got’, their social networks respond.” – Marshal Cohen

“It’s easier to make an impact with products that are
priced a little higher – the consumer can see substantial savings and is more
inclined to spread the word.” – Stephen Baker

Online growth is outpacing that of in-store sales, so Prime Day will inevitably continue to gain steam. It will also expand and become more sophisticated as additional brands are engaged, and it becomes an expected piece of the consumer’s shopping vocabulary. We already know one element of Prime Day 2018’s expansion – an additional six hours of promotions. The mystery lies in what other aspects of its growth will look like, this year and in future years, and how the rest of retail will respond.

“Counter promoting is hard. Just as during the holiday the best way to
compete, especially for specialty retailers, is to leverage their familiarity
with their categories and promote and merchandise to exploit that advantage.” –
Stephen Baker

“Retailers need to focus on offering a wide array of product, and
not just discount their way to compete with Prime Day.” – Marshal Cohen